The year began with farmers facing increasingly drier conditions that eventually led to Waikato being declared a drought zone in March.

It was the worst drought in 70 years, causing an 11 per cent drop in milk production in the three months to the end of June, and cost the average Waikato dairy farm about $144,000, according to data from consultancy company AgFirst. It also affected the sheep and beef industry, resulting in a 3.8 per cent drop in the numbers of ewes going to a ram in the greater Northland- Waikato-Bay of Plenty region.

Nationwide, the export lamb slaughter for 2013-14 decreased 8.5 per cent to 18.6 million head and the export cattle slaughter is forecast to decrease 2.7 per cent to 2.2 million head, according to New Zealand Beef + Lamb figures.

But it was the emotional impact of the drought that largely went unnoticed, Waikato University professor of agribusiness, Jacqueline Rowarth said, and it resulted in some farmers being watched for self-harm.

"People have forgotten the emotional cost of this. It was a terrible emotional strain."

The marginal drop in dairy production resulting from the drought demonstrated the resilience of dairy farmers, she said.

"They keep meeting them to the best of their ability. They really are doing a remarkable job under increasingly difficult circumstances. I do congratulate them because the bulk of them are doing superbly."

The resulting debt had a huge effect on their businesses. The feed bill on one farm that Rowarth was personally involved with totalled $300,000.

Up until a month ago, when it was again looking dry, farmers were "grey" again, she said.

"They were thinking 'I can't stand another year like the last one'. It was grim."

The number of farmers dying prematurely - from self-harm and accidents - is one of the major challenges the industry faced, Waikato Federated Farmers president James Houghton said.

"It's going to be one of the challenges going forward is how we can minimise, isolate and eliminate theses causes."

The farmer group launched a programme in February that targeted depression in the rural sector. Its "When life's a bitch" campaign, to raise awareness of rural mental health, emphasised the importance of talking about depression and removing the stigma around the issue.

"It was so bad that the entire North Island and even the West Coast of the South Island were officially in drought.

"I remember flying over the North Island and looking out the window at the time - it looked like the grass had been sprayed with Roundup."

Guy said the drought also reinforced the need for water-storage projects and irrigation to help the country through dry spells.

New Zealand's food-safety record also became a major issue this year.

It first occurred in January when dicyandiamide residue was found in milk and again in August when three batches of a whey protein product made at Fonterra's Hautapu plant near Cambridge obtained a false positive test for Clostridium botulinum.

Subsequent independent testing found the bacteria was instead the non-lethal Clostridium sporogenes.

It resulted in numerous internal and governmental inquiries into the co- operative and its food-safety procedures.

In ongoing fallout, Fonterra may yet face a court battle with French dairy giant Danone in 2014. In October, Danone said it was asking for more than [Euro]200 million (NZ$338m) from Fonterra in compensation after it had to recall baby- formula products in eight markets as a result of the botulism scare.

It was also an unmitigated public relations disaster for Fonterra. Yesterday, Wellington-based firm BlacklandPR ranked the scare as the second-biggest public-relations disaster of 2013 - below the New Zealand Police's handling of the Roast Busters affair.

For the country's 10,000 Fonterra farmers, it was an issue beyond their control, Rowarth said.

"It wasn't their problem. They hadn't created it and they were peeved off with Fonterra that they get pinged if they do anything bad, and they have lost millions of dollars."

Houghton was also disappointed with the way Fonterra was portrayed during the botulism scare.

The company needed to change its culture but he was optimistic that the subsequent inquiries carried out by Fonterra and the Government would promote positive changes in the dairy giant.

"I think a lot of good is going to come out with what has happened."

However, the food-safety scares had little impact on Fonterra's payout forecast for the 2013-14 season. Strong international prices for dairy led to Fonterra lifting its opening forecast for the new season by $1.20 to $7 a kilogram of milksolids on May 29. It finished the year with the payout tipped at a record high of $8.30.

The strong dairy prices helped fuel the highest levels of farmer confidence in five years, the latest quarterly Rabobank Rural Confidence Survey, released earlier this month, found.

It reported that more than half of the country's farmers were looking forward to a cheery 2014. The country's sheep and beef farmers should also feel more optimistic about 2014, subject to the weather after a challenging year, New Zealand Beef + Lamb chairman-elect James Parsons said.

"Sheep pricing is looking far more positive. Beef demand globally looks solid, though the exchange rate is a concern, particularly if the Reserve Bank lifts the interest rates."

Price volatility and drought were the biggest challenges facing the nation's sheep and beef farmers over the past year, he said.

After a great year in 2012 for sheep farming, 2013 proved "very difficult".

"The drought exacerbated the poor returns achieved for lamb due to poor store prices."

It was also a year where meat-sector reform continued to be a big issue after three members of the Meat Industry Excellence Group were elected to the boards of the Alliance Group and Silver Fern Farms earlier this month.

The farmer-led group was formed in April with the goal of consolidating the red-meat sector.

Parsons said it would be interesting to see how the two co-operative boards respond to the strong message from shareholders.

"Even if one co-operative openly embraces looking at a merger, it requires two to have a discussion.

"The challenge for the newly elected directors is they are part of a board now so are very much inside the tent and any initiatives or ideas they generate will not be visible outside the boardroom and consequently not appreciated by those farmers who voted them in."

Parsons said it was important that this debate was resolved quickly, otherwise it would be a distraction, resulting in the sector appearing dysfunctional.

The silver lining in all the weather volatility was that farmers had become far more resilient.

"2013, for example was the third highest average lamb carcass weight at 18kg in history and this was on the back of one of the worst droughts in New Zealand's recent history, so farmers are better at making proactive decisions early, and maximising production with scarce resources."